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Author: scottsegg2032 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Retire rich Date: 11/21/2005 12:49 PM
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Hi,

I am new to this site and look forward to becoming a smarter investor. I am 32 and have very little time to research stocks. My current retirement assests are $30,000 in a Roth, $13,000 in a Tradional and $12,000 in a 401k. My IRA's are both invested in a Vanguard S&P 500 index fund. And I plan on max'ing out my Roth contributions every year. I would like to be more aggressive since this money will not be touched until I retire.

Should I use the funds in the IRA's to buy individual stocks like the ones recommended by this site (hidden gems, stocks to own, etc.). If so, is it better to open up a brokerage account seperate from Vanguard or buy through Vanguard? How much do I buy? $500, $1,000, $2,000 of a company stock?

I want to do the easiest thing possible without having to spend hours of researh. I am investing for the long term and I am willing to accept the ups and downs with individual stocks in order to benefit for a better return on my investment.

My goal is to retire at 60 and never work again. Any help to accomplish my goal is greatly appreciated.

Thanks in advance,

Scott
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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48295 of 74759
Subject: Re: Retire rich Date: 11/21/2005 1:11 PM
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The simplest thing to do is to subscribe to a good market timing site and follow their recommendations.

www.timingcube.com is the one with the fewest trades. See my links for others. Check out their track record.

http://www.actwin.com/kalostrader/Links.html

If you do not want to research, you can just watch Cramer on CNBC at 6:00 or 9:00 in the evening. I have made a bit of money from his picks by just putting them in a list and buying and selling when the technical indicators say to. Most recent good pick is Birch Mountain, BMD, up big time today.

If you are buying stocks, I think that you should have at least 5 stocks, and preferably around 20. I generally have 40-50.

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Author: cliff666 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48296 of 74759
Subject: Re: Retire rich Date: 11/21/2005 1:18 PM
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Scott: I am new to this site and look forward to becoming a smarter investor. I am 32 and have very little time to research stocks. My current retirement assests are $30,000 in a Roth, $13,000 in a Tradional and $12,000 in a 401k. My IRA's are both invested in a Vanguard S&P 500 index fund. And I plan on max'ing out my Roth contributions every year. I would like to be more aggressive since this money will not be touched until I retire.

Congratulations on your plan. I applaud you for starting and for actually funding your plan. My only suggestion would be to replace the S&P 500 with Vanguard's Extended Market Index Fund (VEXMX), which is the Wilshire 5000 (the total stock market) less the S&P 500. The S&P is the 500 largest companies in the world. They are good companies, arguably the best, otherwise they would not be in the S&P. The trouble is that they have already seen their best growth. Hard to see them going by a factor of ten, lacking inflation, but a smaller company very well might do a ten bagger. The S&P also seems over-priced at the present.

Just food for thought.

cliff

cliff

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Author: valuefanRLA Big red star, 1000 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48298 of 74759
Subject: Re: Retire rich Date: 11/21/2005 1:25 PM
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Hi Scott,

Should I use the funds in the IRA's to buy individual stocks like the ones recommended by this site (hidden gems, stocks to own, etc.). If so, is it better to open up a brokerage account seperate from Vanguard or buy through Vanguard? How much do I buy? $500, $1,000, $2,000 of a company stock?

Vanguard has pretty good size (not good) brokerage fees. You might do better at a discount brokerage, especially if you are investing $2,000 in a stock. A $35 brokerage fee on $2,000 is a lot in my book - especially when you can get a lot better than that at Scottrade or Firstrade. However, that's a personal choice - and not everyone will agree.

I want to do the easiest thing possible without having to spend hours of researh. I am investing for the long term and I am willing to accept the ups and downs with individual stocks in order to benefit for a better return on my investment.

I'd say you've got half the right idea. A willingness to accept the ups and downs in exchange for the better returns. That is definitely necessary. However, and this is where there are a lot of different opinions, I believe that there ain't no such thing as a free lunch. Especially if you want to invest in stocks. I don't believe any sane person could recommend investing in stocks without doing some serious research. I won't even personally invest in a mutual fund without doing some research into the fund - a lot less research than I do if I'm going to invest in stocks.

For a passive investor, which I believe is what you are suggesting, I would have a hard time recommending anything other than an index fund. Again, that's just my 2 cents.

Ryan

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48306 of 74759
Subject: Re: Retire rich Date: 11/21/2005 3:34 PM
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If you do not want to research, you can just watch Cramer on CNBC at 6:00 or 9:00 in the evening

LOL, is the dot com bubble back?

Realistically, if some news letter or web site(including TFM) could consistently select stocks even slightly above average, why would the sell their knowledge to you for a few hundred dollars a year? If they were right only 55% of the time it would be easy to make billions a year trading option on the stocks.

Even if you believe that someone like Cramer is altruistic enough to give you good tips on when to buy a stock, if you don't understand the stock itself, how will you know when it is the right time to sell the stock?

The one situation where you do stand a good chance to select good stocks is in any business where you know the industry well and can take advantage of your knowledge. It does not mean that you have to have insider information, but if you are say a ditch digger, then you probably are a good judge of some specialized equipment makers and pipe manufactures (but not every good product makes a good company!). It has been a while since I read them, but as I recall the books by Peter Lynch emphasized this.

It sounds like you are doing good job of investing right now and I would suspect that the advantages of dollar cost averaging in mutual funds are probably greater than any advantage that you would get from selecting individual stocks for a large part of your portfolio.

If you want to invest more aggressively you might want to just move some of your investments to a more aggressive index fund.

Greg


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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48307 of 74759
Subject: Re: Retire rich Date: 11/21/2005 3:34 PM
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Hi Scott,

First, ignore Joel :-P

Second, if you're not willing to spend time researching stocks, and this is an entirely legimate choice, then do not invest in individual stocks. Instead of Hidden Gems, do a Small Cap index or Small Cap Growth or another Small Cap fund with reasonable fees.

Pick maybe a foreign fund, a REIT fund/index, etc.

Suggested allocation, just to get you an initial idea:

Domestic stock: 55-70% (pick mix of large, mid, & small; value & growth)
International: 10-20% (regular, maybe a little emerging markets)
REIT: 5 to 10% (if you own a home, go lower, you already have money in real estate)
Bonds: Long and/or High Yield ("Junk"): 5 to 15%

Make sure all funds are reasonably low fees and no load (no problem at all with Vanguard).

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48308 of 74759
Subject: Re: Retire rich Date: 11/21/2005 3:43 PM
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By the way, if you're really really lazy :-)... you can put all your money in a Vanguard Targetted Retirment or Fidelity Freedom fund. These 'lifecycle' funds automatically change allocation at time goes by. You pick a retirement date and it gears towards getting more conservative as that date approaches.

FYI, I find them to be a bit conservative for my tastes all along (afterall, they have to cover their butts), so if I was forced into one of those funds, I would pick one at a later date than my actual retirement to get more aggressive. So what I'm saying is, even if you do this, understand the allocation of each fund so you can pick one that matches your tastes, which may not be the same thing as matching your actual retirement date, but should hopefully be close.


P.S. While I, and most people on this board would tend to recommend more aggressive strategies (i.e. less bonds) than official financial planners, do what makes you comfortable. Nothing is a good idea if you can't sleep at night.

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48309 of 74759
Subject: Re: Retire rich Date: 11/21/2005 6:20 PM
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I wish I were in your position now to do some smart investing at your age. I think you are off to a good start. Until recently, I was THE laziest investor. I had a sort of financial advisor that recommended some funds that I should invest in and I invested in them. He of course got a commission on those investments I made. Take a guess how I did? If you guessed I consistently lost money, you would be correct. So the first thing you should know about investing is, DO NOT take the advice of ANYONE (stockbroker or otherwise) that gets some of your money for giving you the advice. At best these people are salesmen trying to line their pockets with your money. At worst, they are outright charlatans (you can find a similar quote to this on Fool.com). Fool.com is a good resource for investing, I think.

Now, what in my humble opinion is your best approach to investing? It's actually very easy. Read "The Four Pillars of Investing" by William Bernstein and do what he says. It's a fairly boring approach to long term investing, but exciting investing will lose you money. He has a very effective approach to long term investing that is the smartest and most effective approach I have ever seen.

So do yourself a really big favor. Read that book.

Stan

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Author: OldOne Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48314 of 74759
Subject: Re: Retire rich Date: 11/21/2005 11:17 PM
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DO NOT take the advice of ANYONE (stockbroker or otherwise) that gets some of your money for giving you the advice.

I completely agree with this.

I want to do the easiest thing possible without having to spend hours of researh. I am investing for the long term and I am willing to accept the ups and downs with individual stocks in order to benefit for a better return on my investment.

I expect you are going to discover that there is no free lunch in the investing world. If you are not willing to do your own research and want to get by on little or no work, you may very well get average results at best. For a no-work portfolio, I have used QQQQ, MDY, and SPY in equal proportions.



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Author: DollarSignz Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48315 of 74759
Subject: Re: Retire rich Date: 11/22/2005 9:07 AM
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Very good advice.

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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48316 of 74759
Subject: Re: Retire rich Date: 11/22/2005 12:53 PM
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So the first thing you should know about investing is, DO NOT take the advice of ANYONE (stockbroker or otherwise) that gets some of your money for giving you the advice. At best these people are salesmen trying to line their pockets with your money. At worst, they are outright charlatans (you can find a similar quote to this on Fool.com). Fool.com is a good resource for investing, I think.
----------------------------------------------------

I got to disagree, in part, with this!

Nearly every one these boarders believes (some fantasize) in some fashion the can pick better than the ETF/Index/Fund returns, otherwise they would default to the SPY. And if you are to lazy to do your own research, (technical or fundemental) well then why should you be stuck with out the same fantasy?

You can spend ten hours studying a good company to determine if it is right for you, or you can work those ten hours, collect more in the paycheck and then get some advice, even pay for that advice and still come out ahead.

Hard to believe but some "planners" actually are doing "planning" to help people make a difference - by "planning"!! This is not advocating looking in the yellow pages, it takes some work to find a planner who works for you!

Yes almost all are salesman, some are "used car" quality and some are even charlatans. But some do this for a living because it is what they know how to do and getting paid for that is not unjustified!







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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48317 of 74759
Subject: Re: Retire rich Date: 11/22/2005 1:06 PM
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Now back to your question!
----------------------------
Suggested Allocation:

Domestic stock: 55-70%
International: 10-20%
REIT: 5 to 10%
Bonds: Long and/or High Yield ("Junk"): 5 to 15%

For a 30' something this is pretty good. YOu also say you are willing to take on a little more risk, so I may lean more toward the small cap or growth in the domestic but with about 50% total, probably go up a few points on international and for bonds, I like high yield, the extra compensation for default risk usually pays again if you do some research.

For using the IRA fund to buy the stocks. Consider the tax consequences of active trading in a taxable v non-taxable account. Whatever you situtation is that should be a relatively easy decision.

How much to buy? HG recommends that you pick one/two up every month. For a couple of reasons. First, so that you actually buy something, also is to help you diversify. I would get up to about 10 stocks from HG, not to exceed my asset allocation- you have the time.

You are willing to do the easiest thing possible- ETF'it. If you still beleive some can pick'em and want the fantasy- hire your deficiencies, a planner. But don't be lazy in finding the planner that is right for U!




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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48318 of 74759
Subject: Re: Retire rich Date: 11/22/2005 1:13 PM
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>>you can put all your money in a Vanguard Targetted Retirment or Fidelity Freedom fund.

>>I would pick one at a later date than my actual retirement to get more aggressive.

-------------------------------------------------------------

This would be just as easy as ETF and with your investment horizon probably give a better return. Another good choice!

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48320 of 74759
Subject: Re: Retire rich Date: 11/22/2005 3:26 PM
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So the first thing you should know about investing is, DO NOT take the advice of ANYONE (stockbroker or otherwise) that gets some of your money for giving you the advice. At best these people are salesmen trying to line their pockets with your money. At worst, they are outright charlatans (you can find a similar quote to this on Fool.com). Fool.com is a good resource for investing, I think.
----------------------------------------------------

I got to disagree, in part, with this!


Maybe I should clarify. Do not take the advice of anyone who gets a -commission- on the stocks they recommend you buy. This breeds dishonesty in the stock brokerage business. Most stock brokers are just pushing whatever stock they have a quota on at the time. But believe me, they only have their own best interest at heart, which is to transfer your hard earned money into their pockets.

If you must use a financial planner/advisor, choose one who does not receive a commission on sales. You have the best chance of getting a financial planner who has your interests at heart who charges only a flat fee (not a commission or a percentage).

I contend, though, that with very little effort and research you can do much better than any stockbroker or financial planner would do for you by just diversifying in index funds like those at Vanguard (I do not work for Vanguard, I am only a fan of their business).

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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48321 of 74759
Subject: Re: Retire rich Date: 11/22/2005 3:34 PM
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I contend, though, that with very little effort and research you can do much better than any stockbroker or financial planner would do for you by just diversifying in index funds like those at Vanguard (I do not work for Vanguard, I am only a fan of their business).

If you are just looking for investment ideas in the stock market, I would agree but financial planning is more than just what stock to buy. A portfolio can be ripped apart pretty fast if a person isn't adequately insured. There are a number of things to consider in a financial plan.

IF


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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48322 of 74759
Subject: Re: Retire rich Date: 11/22/2005 3:44 PM
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In answer to Scott's original question about whether he should use the funds in his IRAs to purchase individual stocks...my response would be a resounding NO. Buying and holding individual stocks is not good for long term investing. The only way you will retire rich this way is if you get very lucky and happen to hit a good stock to buy and hold. It is really akin to putting your retirement money on a roulette wheel and hope you hit that lucky number. Are you going to trust your retirement on a bet? Granted, playing the stock market is not a sure thing either, but you can optimize your chances of doing well by not trying to "get lucky". A steady and consistent approach to investing will get you a lot further than trying to play the exciting "high stakes" of buying individual stocks.

Now if you happen to have extra money left over after funding your retirement account, you can try buying individual stocks. The folks here at The Motley Fool have some good recommendations. Remember though, do not pay anyone a commission for recommending a stock. Just like gambling, though, don't bet anything that you cannot afford to lose or that can keep you from reaching your retirement goal if you were to lose it.

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48323 of 74759
Subject: Re: Retire rich Date: 11/22/2005 3:49 PM
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If you are just looking for investment ideas in the stock market, I would agree but financial planning is more than just what stock to buy. A portfolio can be ripped apart pretty fast if a person isn't adequately insured. There are a number of things to consider in a financial plan.

IF

------------------------------------------------------------------

You are correct, there is more to financial planning than just retirement investing, like insurance and such. However, why pay someone to do it for you if all the answers are easily found in places like here (Fool.com) for nearly free? If you have money to burn, go ahead and pay someone to do it for you. Otherwise, just spend a relatively small amount of time and find the answers for yourself.


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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48324 of 74759
Subject: Re: Retire rich Date: 11/22/2005 4:05 PM
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You are correct, there is more to financial planning than just retirement investing, like insurance and such. However, why pay someone to do it for you if all the answers are easily found in places like here (Fool.com) for nearly free? If you have money to burn, go ahead and pay someone to do it for you. Otherwise, just spend a relatively small amount of time and find the answers for yourself.

I've been here for a number of years. You will find that there are a large number of posts with inaccurate information. It indicates to me that many people have trouble interpretting what they're reading.

IF



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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48325 of 74759
Subject: Re: Retire rich Date: 11/22/2005 4:18 PM
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In answer to Scott's original question about whether he should use the funds in his IRAs to purchase individual stocks...my response would be a resounding NO. Buying and holding individual stocks is not good for long term investing. The only way you will retire rich this way is if you get very lucky and happen to hit a good stock to buy and hold. It is really akin to putting your retirement money on a roulette wheel and hope you hit that lucky number.

I take a little issue with this. I don't think individual stocks, if you research and follow them, are anything like a roulette wheel. In fact, even if you blindly pick stocks and have no idea what you're doing, the AVERAGE result will be that of an index fund. Over a long, retirement-like length of time, individual stocks will indeed yield around that of a fund.

And, anyone who goes into individual stocks should do it for the hope they can make some great investments, but with the expectation that they will pretty much match the market over the long haul, and are just going to have fun doing it - and hopefully keep their expenses down.

However, if you're not interested in doing it, don't... it's that simple.

The difference between the casino and stocks, in that in casino the odds are with the house, and the more you bet the more likely you are to walk out with nothing. With investing, the odds are with you, and the more you play the more likely you are to follow the odds (i.e. the market).

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Author: scottsegg2032 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48326 of 74759
Subject: Re: Retire rich Date: 11/22/2005 5:50 PM
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First off I want to say thanks for all the info so far. And to the person who recommended Jim Krammer, I have seen his show recently and maybe he made a pile of money in stocks but the guy is off his rocker. His show is no better then those with the screaming football betting guys stating how they beat the spread 90% of the time. That being said the reason why I invested in the S&P 500 index fund in the first place is because a couple years ago Jim Krammer said on his radio show (before he went totally nutz) that if you do not have the time to research companies then you should just buy into a S&P 500 index fund. That advise seemed to make sense to me so that is what I did.

Well it sounds like what I have been thinking is true. All this talk about making 25-50% returns on Hidden Gems, Stocks to Own, etc. is bogus. I go buy the phrase, "if it sounds to good to be true, it probably is". And all that sounded to good to be true.

I certainly do not have the time to research companies so I guess I should stick to index funds. I will take the advise given and read "the four pillars of investing". I get the impression my money is not allocated appropriately. I also dont think I need to spend a $1,000 or so on a financial planner at the moment. I am single, no kids, no wife, no debt and own my house (still making mortgage payments at 4.125% fixed).

All I want to do is every january put the maximum into my IRA and forget about it. Yes, I am willing to put some time in to be sure my money is allocated properly but thats it. So what I gather from all the posts is that the best thing for "me" is to allocate my nest egg in index funds suited for my age (or maybe more appropriately stated, suited for the lenght of time until I begin to depend on that money). That seems to make sense. If I am wrong then please tell me so.

Meantime, I will continue to read everyones posts, read "the four pillars of investing", max out my IRA and leave finding the next great stock to Mr. Krammer.

Scott "Future Millionaire"


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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48345 of 74759
Subject: Re: Retire rich Date: 11/23/2005 9:00 AM
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I've been here for a number of years. You will find that there are a large number of posts with inaccurate information. It indicates to me that many people have trouble interpretting what they're reading.

I wish I could rec this more than once. I would also add that conventional wisdom should be carefully examined because it is amazing how often it doesn't apply.

rad


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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48354 of 74759
Subject: Re: Retire rich Date: 11/23/2005 11:58 AM
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I wasn't really recommending getting opinions from the discussion boards about what stocks to buy or how to come up with a financial plan. I was referring to the wealth of information available from all the editorial and published information available on this site. I subscribed to "The Motley Fool Rule Your Retirement" series which has some pretty good advice. There are also some really good books out there on financial planning and retirement investing. William Bernstein and John Bogle come to mind. I would avoid any subscription investment newsletters as well, though. The vast majority of them are from stockbroker types who are also pushing whatever stocks some company is paying them to hawk or they are trying to "time the market" which never works unless you are extremely lucky. And luck always runs out.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48360 of 74759
Subject: Re: Retire rich Date: 11/23/2005 12:56 PM
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"Maybe I should clarify. Do not take the advice of anyone who gets a -commission- on the stocks they recommend you buy. This breeds dishonesty in the stock brokerage business. Most stock brokers are just pushing whatever stock they have a quota on at the time. But believe me, they only have their own best interest at heart, which is to transfer your hard earned money into their pockets.

If you must use a financial planner/advisor, choose one who does not receive a commission on sales. You have the best chance of getting a financial planner who has your interests at heart who charges only a flat fee (not a commission or a percentage)."

The above is not an accurate representation.

Advisors can get paid multiple ways. They will all be paid well if they do a good job. Financial Advisors (FA) are in the top 1% of all income earners -- they have a higher average than sport professionals.

Some can be paid an hourly rate like a lawyer. Some can be paid transaction based by selling a stock or mutual fund. Some can be paid based on a percent of assets under management. It does not matter as in the end, you will pay for their services, just like you would pay for the services of a doctor or lawyer.

Just because someone gets paid an hourly rate for their advice does not mean their advice is any better than someone that gets paid based on the transaction. For those that simply need to buy and hold, you are often much better off financially to pay based on the transaction (up front sales charge) than you are to pay a quarterly or annual fee for on going advice. The FA that sells the fund has THE SAME fiduciary responsibility as the person that simply gives advice.

I don't think anyone should have to pay an ongoing fee unless they need a lot of handholding or have a very complication situation that requires the investments to be adjusted every year.

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48362 of 74759
Subject: Re: Retire rich Date: 11/23/2005 3:14 PM
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Scott,

I applaud your courage and decision to buck the "conventional wisdom" of following advice from "professional" money managers.

I will start off by saying again, I am a huge fan of Bernstein's book "The Four Pillars of Investing". Before I read that book, I was the average investor just taking the advice of whatever "professional" money manger or financial advisor I happened to be listening to at the time. And I consistently underperformed "the market". Then a good friend recommended I read Bernstein's book. That turned out to be the best financial advice I had ever recieved. Bernstein really opened my eyes as far as retirement investing goes (that is what the book is about, retirement investing, not financial advising) although he has some opinions about financial advisors, mostly not very supportive of their services. In Bernstein's book you learn that the vast majority of FAs have no training in being FAs. They most often just pay some sort of licensing fee which requires no training to get and hang out a shingle declaring their services. A very few FAs do a good job and are well paid for those services, the vast majority aren't any better than you can do yourself, on your own, without paying anyone to give you advice. At least when you pay for a doctor's or lawyer's services, you are getting advice from someone who has trained for years in a highly regulated profession.

Just by reading Bernstein's book, you will be more knowledgeable about the stock market and RETIREMENT investing than the vast majority of "professionals" out there, including stockbrokers, money managers and FAs and you will consistently outperform them. This is accomplished by putting your retirement funds in indexed funds. This doesn't mean just plunking everything in a S&P500 index fund, you need to diversify among the "overall market" ie S&P500 as well as large cap, small cap, value, growth, REITs, precious metals, foreign markets and even bonds and both taxable and tax deferred vehicles. And you need to have the correct proportions of your holdings in those funds, do dollar cost or value averaging and rebalance every once in a while.

If you do this correctly, you will perform at least as well as the market and perhaps a little better, which is far better than most professional money managers will do for you.

Now if you want to "play the market" by buying and selling individual stocks (not using your retirement funds to do so) then by all means get the best advice and research you can from professionals who live and breathe this stuff. But remember, relying on paid "professional advice" for your retirement is iffy at best, and catastrophic at worst.

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Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48368 of 74759
Subject: Re: Retire rich Date: 11/23/2005 6:01 PM
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Just because someone gets paid an hourly rate for their advice does not mean their advice is any better than someone that gets paid based on the transaction.

It doesn't mean it, but it does mean that their incentives are not in line with yours. Who's more likely to be honest and helpful, who's more likely to give you the pluses and minuses honestly and objectively... someone who gets paid money whether it works out or not, and who gets paid for encouraging you to do things which may not be in your best interest (i.e. move in and out of funds). Or someone who gets paid by you for giving honest advice and the full story and who has absolutely no personal incentive in you doing one thing or the other?

If you think that a commission doesn't influence advice... well, first, you're crazy. And second, look at the lawsuits and settlements against insurance companies and advisors for selling annuities to people who they are entirely inappropriate for.

Now, does this mean that EVERY commission based person is corrupt... of course not, but it does mean that's not the way to play your odds. If you happen to have a relationship with a commission-based broker, and you know enough to make your own decisions and know they've been honest with you, then great.


I don't think anyone should have to pay an ongoing fee unless they need a lot of handholding or have a very complication situation that requires the investments to be adjusted every year.

This doesn't make much sense to me, at least from someone who was just defending commission-based situations. What's the difference for paying a 1% commission from a commission-based broker that averages to $500 on any given year, and paying a $500 annual fee for advice... answer: nothing. Except you know the annual fee guy won't try to trade you in and out of stocks to make himself money.

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Author: sprescott58 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48371 of 74759
Subject: Re: Retire rich Date: 11/23/2005 6:30 PM
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Scott,

One more thing. You also have one of the very important parts of your investment portfolio in place. Owning your own home. Combined with intelligent investing, your are well on your way to retiring rich. Keep it up.


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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48383 of 74759
Subject: Re: Retire rich Date: 11/24/2005 10:34 AM
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"This doesn't make much sense to me, at least from someone who was just defending commission-based situations. What's the difference for paying a 1% commission from a commission-based broker that averages to $500 on any given year, and paying a $500 annual fee for advice... answer: nothing. Except you know the annual fee guy won't try to trade you in and out of stocks to make himself money. "

Then I will try to clarify:

If a person buys 10K in a fund family as an IRA Rollover, they could pay a few hundred dollars for an hourly rate ever year for advice. They would pay about 1.0%+ for a wrap account but generally those require around 50K or more, or they could pay around $500 once and forget about it.

Now if I was sleezy, I could see that the best way to make money in the long run would be to "annuitize" my business by pushing the client into a wrap account or simply paying an annual fee for advice. If I make 1% a year off their money in a wrap, I would make $1000 by year ten. If I get paid based on advice, I would charge around $135 or more for advice would have made $1350 by year ten. If I simply sold them a fund, I would have made a little over $500. I would have to do something sneaky -- and risky, if I wanted to get more money out of that same bucket.

The FA that gets paid based on advice is not impact by what fees the client may have to pay. I have worked with a FA for life insurance and certainly respect what they do but I would not use him again as it is simply too expensive for on-going visits -- and I still paid the same fees as if I would have went direct to the life insurance company in the first place.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48386 of 74759
Subject: Re: Retire rich Date: 11/24/2005 12:30 PM
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Hawkwin writes,

If a person buys 10K in a fund family as an IRA Rollover, they could pay a few hundred dollars for an hourly rate ever year for advice. They would pay about 1.0%+ for a wrap account but generally those require around 50K or more, or they could pay around $500 once and forget about it.

What on Earth could a financial advisor have to say that would be worth a "few hundred dollars" per hour to listen to?

intercst


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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48420 of 74759
Subject: Re: Retire rich Date: 11/25/2005 11:52 PM
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This doesn't make much sense to me, at least from someone who was just defending commission-based situations. What's the difference for paying a 1% commission from a commission-based broker that averages to $500 on any given year, and paying a $500 annual fee for advice... answer: nothing. Except you know the annual fee guy won't try to trade you in and out of stocks to make himself money.
------------------------------------------------

If a client has the money in a wrap account and then pays a 2% fee, and doesn't pay "commissions" on in and out trading then the fixed rate fee is actually his incentive to get better returns because of the growth in principal equals growth in fee.

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Author: rrosenkoetter One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48422 of 74759
Subject: Re: Retire rich Date: 11/26/2005 12:46 AM
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>> Just because someone gets paid an hourly rate for their advice does not mean their advice is any better than someone that gets paid based on the transaction. <<

-------------

The problem is... the one who is paid an hourly fee will choose the best fund for you from all the funds in the world...

The one who gets paid a commission, even if he or she is completely honest, will choose the best fund for you from the list of funds that pay commissions

You will never be told about Vanguard's and Fidelity's super low fee index funds from a commision based broker... The odds are very very good you will be placed in funds that have much higher (1%-1.5%) fees than equivalent funds at Vanguard.

The broker will NOT think he or she is doing you a disservice. Most of them have convinced themselves that the funds they place you in with the higher fees are BETTER than the low-cost funds out there, and worth the extra money...

They are wrong however... For EVERY fund out there that charges an up-front sales charge or seven years of back-end 12b-1 management fees, there is a low-cost equivalent fund that does better over the long run because it has a 1.5% advantage over the expensive fund.

Most commission-based brokers are not evil... They're just ignorant... (That of course is a broad generalization with no research to back it up...)

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Author: hjg0989 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48440 of 74759
Subject: Re: Retire rich Date: 11/26/2005 3:19 PM
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Hi Scott !

You are doing very well, and I have no doubt that you will reach your goal. You seem to have the basics down and good common sense. You also have a great nest egg for such a young age !!!

If I were you, I would decide on what asset allocation you are interested in. Once you have decided on that, find the right (index) funds to invest in. Then, set up automatic withdrawals and increase them by using a percentage of your future raises.

Every time I do my taxes I go through my records to see where I spent my money the year before. I probably don't have to do this every year anymore, but I do just to keep an eye on my spending. I pay with a credit card when ever possible to obtain frequent flier miles and because it makes it easier to track my spending. I pay my card off every month.

I am 7.5 years away from retiring at age 56. I have a spreadsheet that shows how much money I am saving for retirement and where the money goes. I have projected out how much to increment my savings each year. I also include the future amounts that I am allowed to invest in 401ks and Roth's each year since the limits are increasing. This way I don't have to rethink everything at the start of the year.

I also have an "if I die" sheet prepared that lists all the accounts that I have. This is important to have whether you are single or partnered. you should consider having a will set up to spare your family from probate.

I tried my hand an stock picking and discovered that I s*ck big time at it. There is enough work to do in keeping up with tax changes, insurance, asset allocation, multiple accounts, etc. For most of us, it doesn't make sense to try and pick stocks too.

Best of luck to you,

-helen


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Author: CubFan100 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 48793 of 74759
Subject: Re: Retire rich Date: 12/10/2005 9:12 PM
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Interesting thread! A lot of good points on all sides.

While I've enjoyed the ride, I'm now REALLY interested in Helen's plans. I'm 50, would love to retire at 56 or so, but yikes, things don't necessarily get easier as you draw closer to retirement.

While some things are better known - I'm in the house I will retire in, don't plan on moving, kids are mostly through college, etc - some things are still very unknown.

I'm been saving practically since 401Ks were invented, but have a difficult time projecting future earnings, understanding what I will spend in retirement, and am concerned I may live too long (well, at least concerned I might outlive my savings). I thought I was moving right along based on the free retirement calculators, then I use Fidelity's calculator with 250 scenarios and poof! 30% chance I will outlive my savings. I hear I need 70% of pre-retirement income, then I read that I might need 100% of pre-retirement income.


Helen, how did you do it?

Steve




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